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Once again the triple called for banks to sell subsidiaries

18 December 2010 / 10:12:08  GRReporter
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Sell subsidiaries, assets and increase capital is the advice of the economists from the supervisory triple of the International Monetary Fund, European Central Bank and European Commission after the end of the planned series of visits in the six largest Greek commercial banks. The National Bank of Greece, Eurobank EFG, Alpha Bank, Piraeus Bank, ATEbank and Post Bank came under the microscope of the international experts, and the assessment was that if they want to shake off their dependence on the European Central Bank they have to resort to selling assets. The experts made a similar proposal during the spring.

The representatives of the triple said that sometimes in times of financial difficulties the capital increase is not sufficient to preserve the healthy condition of a bank. They recommend the Greek bankers to use all possible ways to raise capital and not rely on the fact that the European Central Bank will always be available. They should be looking for alternative ways to support capital adequacy, and now is the time to dispose of assets accumulated in the past. For closer control of the bank assets it is suggested to perform a simulation stress test for the dependence of the banking system on the European Central Bank and for the liquidity.

In late November, the level of funding of the Greek banks by the European Central Bank (ECB) reached 95 billion euros as compared to 92.4 billion euros at the end of October this year, which is 2.9% higher. The reason is that so far 6 billion euros in deposits have been withdrawn from the banking system of the country. Other 35 billion euros in government bonds are expected to be bought back by the banks after their issue in early 2009. 15 billion euros are needed to compensate for the close of the international markets for the local banks and 20 billion euros are needed for the payment of bonds issued by banks after the closure of the external markets for Greek banks with the aim to refinance.

Some experts argue that the situation for Greek banks will not improve in the medium term. There is no perspective for the withdrawn in the recent months deposit to be returned and for the sale of government bonds as a form of successful financing we cannot even mention. With the exception of the efforts of the two largest commercial banks in the country the National Bank of Greece and Eurobank EFG, the interbank markets are still closed to other local players. Meanwhile, the maturities of the next packages of government bonds will come relentlessly, and commercial banks will not be able to refinance freely and will remain directly dependent on the European Central Bank.

In most cases, funding from the European Central Bank is done by issuing guarantees on Greek government bonds and credit packages, which banks deposit also as a guarantee in the European financial institution. Imerisia wrote that the problem is that most Greek banks have exhausted their limits, giving them the opportunity for lodge these assets for liquid capital and currently they have no other alternative. Katemerini on the other hand quoted local bankers who say the situation has deteriorated further since there were concerns about the financial position of Portugal and Spain, and even more serious concern for unity of the eurozone. These concerns have brought a further deterioration in the climate for Greek banks, and the access to the interbank market has become even more difficult.

Tags: Economy Markets banks European Central Bank Greece Government bonds Euro
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